Following code is an example of text placed into a textarea from a database.
You could try something like this:
jQuery(function($) {
var pane = $('#inputPane');
pane.val($.trim(pane.val()).replace(/\s*[\r\n]+\s*/g, '\n')
.replace(/(<[^\/][^>]*>)\s*/g, '$1')
.replace(/\s*(<\/[^>]+>)/g, '$1'));
});
Which gives the result:
some text here...
more text here...
Though this may not be bulletproof, it should prove to be much faster/more efficient than creating elements from the HTML value of the textarea.